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EURUSD Double Top Bear Flag?

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Market Overview: EURUSD Forex

The market is forming a EURUSD double top bear flag (Oct 12 and Oct 24) on the weekly chart. The bears need to create follow-through selling to increase the odds of a retest and breakout attempt below the October 3 low. If the market trades lower, the bulls want a final flag reversal up from around October 3 low.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Double Top Bear Flag, EURUSD Weekly: Double Top Bear Flag? Bears Need FT
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with a long tail above and a prominent tail below.
  • Last week, we said that while the sideways to up pullback can still last a while more, odds are the pullback is minor and we will get a retest of the prior leg extreme (Oct 3) after the pullback.
  • This week traded higher early in the week but did not get sustained follow-through buying and traded lower, closing in the lower half.
  • The bulls hope that the strong move down from July is simply a sell vacuum within a trading range.
  • They want a reversal up from a double bottom bull flag (with Mar 15) and a parabolic wedge (Aug 3, Aug 25, and Oct 3).
  • So far, the pullback has bear bars and a lot of overlapping ranges. The bulls are not yet very strong.
  • They need to create follow-through buying trading far above the bear trend line and the 20-week EMA to increase the odds of a reversal.
  • If the market trades lower, they hope that the current sideways trading range will be the final flag of the move down.
  • The bears got a tight bear channel testing the trading range low.
  • That increases the odds of at least a small sideways to down leg after a larger pullback (bounce).
  • They see the last 4 weeks simply as a small pullback and want the market to resume lower, breaking far below the March low with follow-through selling.
  • The selloff from July 18 lasted a long time and was climactic. The market is forming a pullback that lasts at least a couple of weeks.
  • They want the pullback (bounce) to be weak (overlapping bars, doji(s), bear bars) and sideways, followed by another leg lower. 
  • So far, the pullback is sideways and has overlapping bars (therefore weak).
  • They want a resumption lower from a double top bear flag (Oct 12 and Oct 24).
  • Since this week’s candlestick is a bear bar with tails (small body; looks like a doji), it is a sell signal bar albeit weak.
  • For now, while the sideways to up pullback can last a while more, odds are the pullback is minor and we will get a retest of the prior leg extreme (Oct 3) after the pullback.
  • Traders will see if the bears can get a follow-through bear bar or will the market trade slightly lower but close with a long tail or a bull body.
  • If they get strong follow-through selling, we could get a retest of the October 3 low and a breakout attempt below.
  • If instead, the retest of the October 3 low is brief and reverses up immediately, it will increase the odds of the pullback (bounce) resuming for much longer from a final flag reversal.
  • Or will the bears simply fail to get follow-through selling (like the third week of Oct)?

The Daily EURUSD chart

EURUSD Daily: 3rd Leg up or Retest Oct Low? Final Flag?
  • The EURUSD was mostly sideways for the week. The market traded higher earlier in the week but turned lower on Tuesday with some follow-through selling. Friday was a doji bar closing below the 20-day EMA.
  • Last week, we said the odds continue to slightly favor the current pullback to be minor and favor a retest of the prior leg extreme (Oct 3 low) after the pullback.
  • The bulls hope that the strong move down (Jul 18 to Oct 3) is simply a sell vacuum test of the 46-week trading range low.
  • They want a larger pullback (bounce) from a parabolic wedge (Aug 25, Sept 14, and Oct 3) and a large double bottom with the March low.
  • They hope to get another leg up from a double bottom bull flag (Oct 13 and Oct 26).
  • They need to create consecutive bull bars closing near their highs, breaking far above the 20-day EMA and the bear trend line to increase the odds of the bull leg beginning.
  • If the market trades lower, they hope that the small sideways trading range in the last 4 weeks will be the final flag of the move down and reverse up from a double bottom with the October 3 low.
  • The bears got a tight bear channel down lasting 13 weeks.
  • They want a strong breakout below the March low and a measured move down based on the height of the 46-week trading range.
  • The move down since July 18 is in a tight bear channel. That increases the odds of at least a small sideways to down leg after the current pullback.
  • The bears want a resumption lower from a double top bear flag (Oct 12 and Oct 23).
  • If the market trades higher, the bears want a reversal from a wedge bear flag with the first two legs being October 12 and October 24.
  • For now, while the market could still trade sideways to up for a while more, odds slightly favor at least a small retest of the October 3 low after the pullback.
  • Traders will see if the bears can create follow-through selling or will the market continue to stall around the current levels, just above the October 3 low area.
  • If the retest of the October 3 low is brief and reverses up immediately, odds will swing in favor of the pullback (bounce) resuming for at least a couple more weeks.

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